Chief Economist Scott Brown discusses the latest market data.
The March Employment Report was strong. Nonfarm payrolls rose by 431,000 – less than expected but with upward revisions to January and February (a 562,000 monthly average in 1Q22). The unemployment rate fell to 3.6%, which is where it was before the pandemic. Labor force participation rates improved and, with the exception of older workers, are at or near pre-pandemic levels.
Personal income rose 0.5% in the initial estimate for February (+6.0%), led by a 0.9% gain in private-sector wages and salaries (+12.6% y/y). Inflation-adjusted disposable income fell 0.4% (-1.6%), reflecting reduced transfer payments. Personal spending rose 0.2% (-0.4% adjusting for inflation), following a revised 2.7% gain in January. The PCE Price Index rose 0.6% (+6.4% y/y, well above the Fed’s 2% goal).
Next week: Investors will look to the minutes of the March 15 to 16 Federal Open Market Committee (FOMC) meeting to gauge the likelihood of a steeper increase in short-term interest rates, as well as any details about the upcoming runoff in the Fed’s balance sheet. The ISM Services Index for March should remain consistent with moderate growth in the near term. Jobless claims will undergo annual benchmark revisions, but that shouldn’t change the picture of a tight labor market. On Tuesday, Fed Vice Chair Lael Brainard will speak on the variation in inflation experiences across households.